CANADA FX DEBT-C$ rebounds as volatile crude prices jump
* Canadian dollar at C$1.2424 or 80.49 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, Feb 5 (Reuters) - The commodities-linked Canadian dollar strengthened more than a cent against its U.S. counterpart on Thursday as crude prices rebounded from the previous session's plunge and remained the currency's primary mover. Rising violence in Libya, including a raid by gunmen on an oil field, and monetary easing by China that could lift the demand for crude, helped prop prices up some four percent. ID:nL6N0VE279] "It's all oil," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets. "The Canadian dollar, and almost all Canadian variables - financial or economic - are at the mercy of oil prices at the moment." Reitzes said the crude production trend is still upwards and until that trend reverses course, a sustained rally would be difficult. Canada is a major oil exporter and the currency has closely tracked the crude market in recent months. BMO is expecting oil at around $57 a barrel by the end of the year. The Canadian dollar, which has see-sawed to the tune of oil this week, ended the session at C$1.2424 to the greenback, or 80.49 U.S. cents, stronger than Wednesday's close of C$1.2565, 79.59 U.S. cents. The market was also digesting data that showed Canada's trade deficit in December was significantly smaller than had been expected by analysts. Still, it nearly doubled to C$649 million, hurt by cheap crude. Non-energy exports, a main focus point for the Bank of Canada, rebounded but in volume terms, exports declined during the fourth quarter while imports increased, said Charles St-Arnaud, senior economist and strategist at Nomura Securities in London. "Mathematically, it means you'll have a drag on growth coming from exports in Q4 and quite a substantial one," said St-Arnaud. Investors will next focus on January employment reports from the United States and Canada on Friday. "Everyone's looking for a bad number, any surprise positive will be good for Canada," said BMO's Reitzes. He said that another big move in oil prices will likely overshadow the economic data. Canadian government bond prices were mixed, with longer term securities falling across the maturity curve. The two-year was off 7.5 Canadian cents to yield 0.433 percent and the benchmark 10-year was down 90 Canadian cents to yield 1.358 percent. (Reporting by Solarina Ho; Editing by Peter Galloway and Grant McCool)
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